Federal Politics

License article

Sales pitch in anticipation of spending cuts

The NSW budget will be handed down on June 12 and the Treasurer, Mike Baird, has begun his campaign of expectation management that will likely run for the next five weeks.

The same thing happened last year, of course, when the rhetoric about a ''tough'' budget started almost as soon as Barry O'Farrell was sworn in as Premier and the new government discovered the infamous ''black hole'' allegedly left by the previous administration.

Then, the pitch was the need to make cuts because the state had been ''living beyond its means'' under Labor.

But the O'Farrell government has been in power for a year, so this time around there is a need for a slightly different approach.

Now, it's all about maintaining ''sustainable finances'' in the face of collapsing revenues.

For some months Baird has been peppering audiences with the phrase at business lunches around Sydney to highlight the benefits of maintaining the highest possible credit rating for the state.


His favourite line is that a good credit rating allows the state to achieve the ''three Cs'': confidence, capital and cost (or rather, to avoid the cost of a rating downgrade).

More pointedly, in a departure from the usual arguments trotted out by state treasurers, he has also chosen to highlight the social benefits that can flow from a set of nicely balanced books.

Outlining his philosophy to the Sydney Institute in late March, Baird said ''a lack of flexibility'' in the state's finances would be ''most felt in the face of the greatest need''.

He told the room about a couple in his electorate whose 16-year-old daughter is disabled. ''They live day in, day out with the concern that when they are elderly, where will she live? Who is going to look after her?'' he said.

The girl's mother told him about how she cried when she learned about how millions of dollars had been wasted on ''a particular project'' because she knew how badly funds were needed by families like hers.

He went on to tie the story to the cost of funding the much vaunted $6.5 billion National Disability Insurance Scheme, which will provide long-term care and support to the disabled.

''Any government is going to want to participate in that scheme and you want the flexibility of finances to be able to participate in that scheme,'' he said.

It was a significant departure from the usual rhetoric about the need to pay for roads, rail and hospitals (although those were certainly mentioned).

But since then the state's finances have taken a big hit, making the kind of social dividend Baird is highlighting less likely, for now at least.

At the time of his Sydney Institute address, the mid-year budget review had revealed a collapse in GST payments to NSW forecast to rip $1.6 billion over four years from the bottom line.

Things have steadily got worse. The latest figures show a further deterioration in GST payments worth $3.8 billion over the forward estimates.

Overall, that's $5.4 billion less than the government had budgeted for last September. The figure is very similar to the $6.1 billion GST collapse announced in the Victorian budget this week.

That budget, featuring the axing of a further 600 public service jobs (4200 since December) and deep cuts to TAFE courses, is being described as imposing ''the biggest cuts since [Jeff] Kennett''.

The sales pitch aside, all the signs indicate that NSW residents should brace for much the same.